What is a Payroll Audit and Why Do you Need One?
As an employer, you’ll already be aware that your payroll is one of the most vital responsibilities you have when it comes to both your business and your employees. Unfortunately, no matter how committed you are to your operations and procedures, mistakes do happen; and when it comes to your payroll and business compliance, this is one area you do not want to make them. Fear not, however, as there’s a manageable way to avoid this happening and it’s known as a payroll audit.
A payroll audit will not only benefit your business in terms of compliance but it can help to optimise your internal procedures too. By running regular audits, you can highlight any areas where mistakes are being made, ensure your business is compliant, improve efficiency and avoid losing money. Read on to find out exactly what a payroll audit is, 3 reasons why you need one and why you should consider outsourcing yours.
So What Exactly is a Payroll Audit?
A payroll audit is exactly what it sounds like. Essentially an analysis of your payroll procedures, an audit will highlight any errors that have been made and will ensure that you are compliant with the rules and regulations of the governing bodies where your business operates. In the Middle East, there’s a number of mistakes you can make in your payroll, and they’re more common than you’d think! From not complying with overtime rules, to misunderstanding the laws surrounding payroll for nationals vs. expatriates (and many more in between), the repercussions for getting it wrong in your Middle Eastern region can be severe.
Payroll audit objectives generally consist of things like looking at your business’s active employees, checking their pay rates, reconciling your outgoings with your employee’s payslips and ensuring your compliance in regards to taxes and employment laws. At a minimum, your payroll should be audited once per year, but some businesses will do theirs at the end of each quarter. If your payroll accounts for a large proportion of the expenses for your business, this is something you want to take seriously! Payroll audits can be done internally by your own team, or externally by a third party, we’ll cover this later on and explain which option might be better for your business.
If you’ve never considered outsourcing your payroll before, take a look at one of our previous blog posts here for some advice.
3 Reasons Why Your Business Needs a Payroll Audit
1. Compliance, compliance, compliance!
Payroll audits are also known as compliance audits, and when it comes to compliance you want to dot all your i’s and cross all your t’s. As we mentioned earlier, no matter how reliable you think your operations are, errors can be easily missed. One of the biggest payroll complications that global companies can run into is regulatory compliance. A payroll audit will help to highlight any areas of weakness or show you where mistakes have been made, so you can prevent them from turning into serious issues. They’re essential for ensuring your information is secure, your documentation is correct, you’re complying with employment laws and that your remittance and tax withholdings are accurate. Getting into trouble with any of the above could jeopardize your company’s reputation and financial performance.
2. Ensure your payroll is accurate and up to date
After compliance, one of the most important factors to consider when running your payroll audit is whether or not your employee information is correct. Nobody wants to leave their employees disgruntled; regular audits will highlight any mistakes being made with their pay rates before they become bigger issues that affect their happiness at work. Further to this, it will ensure that your employees hours are being logged correctly and will even allow you to reconcile the amounts paid with the hours worked and the paychecks given. Regular audits can identify where mistakes have been made that could result in employees not being paid correctly, whether it’s an incorrect pay rate or not being paid appropriately for different types of employment leave.
3. Reconcile your bank accounts with your payroll
If you’re regularly running financial audits, your accounting team is likely to be on top of this, however, it’s still a vital part of your payroll audit. Don’t forget to ensure that all monies paid out from your business’s bank account match the payslips given to each employee and have been documented correctly within the payroll history. From something small like inputting incorrect figures to bigger issues like forgetting to update an employee’s new pay rate or even failing to remove an employee from payroll when they leave the company – these things happen. Audits are imperative in picking up these mistakes and give you an opportunity to improve procedures so they don’t happen again.
Can I outsource my payroll audit?
The short answer is yes, and we do recommend that you consider this. While you can conduct a payroll audit internally, it can be incredibly time consuming and will be subjective. An external third party will be entirely objective and will provide a much more comprehensive audit, covering areas of weakness in your business that you might miss. It will also be a much more cost-effective solution when taking into account the manpower and time required to run the audit yourself.
At OPS we offer a fully comprehensive payroll audit service that will scrutinise your payroll practices, pinpoint any areas of non-compliance and keep your payroll procedures running as efficiently as possible. Take a quick look here to see the full list of services we offer.
Not running regular payroll audits could lead to you losing money or even breaking employment and tax laws. Don’t let these mistakes happen to you, organise a payroll audit before it’s too late. If you do want to outsource then take a look at what we offer here, and get in touch for a personalised quote.
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